Construction Project Management Tips to Stop Profit Bleed
Are your construction projects quietly bleeding profit?
In an industry where over-schedule and over-budget projects are the norm, change orders, labor shortages and communication gaps can quickly add up to slash your firms' profit.
Get a free consultation for support with your construction hiring or project management needs, or read more for our construction project management tips that will help you stay on schedule and improve your profit margin.
The Inevitable Twists and Turns of Construction Project Management
91.5% of construction projects run over budget, over time or both, according to Bent Flyvbjerga’s June 2023 assessment of a database containing 16,000 construction projects.
Delays and budget hikes are often inevitable because of the nature of construction work where change orders are frequent. But if not managed properly, these setbacks lead to a loss of credibility with your clients and can cut deeply into profit.
This article provides six construction project management tips to ease the burden of inevitable project shifts that lead to hidden losses if not correctly maneuvered:
1. Create a detailed project schedule
2. Get the right people involved
3. Stay on top of reporting
4. Communicate with your subcontractors
5. Don’t underestimate labor cost
6. Fight to stay proactive
1. Create a Detailed Project Schedule
As projects evolve, superintendents for all trades often scramble to get the right trades individuals on site at the right time to move projects forward.
While some last-minute scrambles are unavoidable, project teams can avoid many of them by making sure all parties are clear on the plan and specs at project kickoff. This is especially true when you take on a project that differs in size and scope from what you usually manage.
Building out a thorough project schedule is one of the best ways to make sure you have everything — and everyone — you need for each project phase.
Many firms create initial schedules that are 65–75% complete, which leaves too much room for discrepancies across the team. It also cuts visibility of what’s needed next, so you risk overlapping trades, which can tank your productivity.
To prevent multiple teams from working on top of each other, you should list all of the trades you need and their corresponding activities during the planning phase. This will help you map out when you need each trade on the job and prevent overlap.
2. Get the Right People Involved
Failing to factor in the nuances of each project, including what expertise and personnel you need on site for each phase leads to some of the costliest errors and rework costs we have seen (which represent 12% of a project’s total cost on average, according to Construction Industry Institute). Identifying proactive solutions to assess and meet your hiring needs early is therefore crucial.
As an example, one construction firm told us about a project they took on to erect an ICF wall system on a $50 million school. They didn’t partner with a staffing provider, and they didn’t have the right subcontractor QC team, design team or QA team that knew the system well enough to accurately assess its quality during the submittal and installation phases.
After they erected the walls, they found a defect throughout the entire wall structure. They had to make repairs when building material and labor costs were surging during the coronavirus pandemic, so it cost them over $30 million to fix.
When the team reworked the walls, they brought on an additional quality control expert and engineering firm to inspect the work, which they should have included at project kickoff.
These oversights are surprisingly easy to make when your cost projection and razor-thin profit margins tempt you to run dangerously lean. But when you bring in a larger project, you must scale accordingly and cover your bases.
Don’t staff a $50 million job for a $10 million job. And keep in mind, an excellent superintendent and quality control for one job isn’t necessarily the right fit for another, depending on their expertise.
3. Stay On Top of Reporting
The first 60 days are some of the most important to start your project on track and get the right people involved. During that time and throughout the entirety of the project, it’s also important to stay on top of your reporting.
In a 2020 study of more than 3,900 industry leaders, Autodesk found that contractors around the world lost $1.8 trillion due to bad data used for reporting.
It might feel like a tedious recurring task, but accurate project data can save a tremendous amount of money by helping you identify revenue-draining errors early and improve work quality.
Staying on top of your reporting is also the best way to track progress and make sure your laborers complete their scopes of work.
When you push these obligations to the end of the project, you’re left playing catchup. You can quickly end up with a daunting list of unfinished paperwork and project tasks when you’re trying to close out your project.
The additional time spent will cause profits to dwindle — especially if you need to go back and fix errors that could have been caught sooner with timely reporting.
Finally, be sure to house your reports and documents in a database that all relevant stakeholders and project teams can access. Everyone must buy into the reporting program to prevent information silos and data loss, which can easily happen due to a computer crash or user error when valuable documents aren’t maintained on a centralized system.
4. Communicate With Your Subcontractors Early and Often
After getting the right parties involved and setting up a centralized reporting system, the next important construction project management tip is to manage your subcontractors well. That means regularly communicating expectations before and during their scopes of work.
Even if a subcontractor is not directly involved in the initial phases of a project, managers should communicate with them early.
For example, your subs need to know what materials they’ll need as soon as possible — especially when construction material is in short supply. It’s also important to keep them aware of any changes in project scopes and timelines. If there’s a miscommunication here, your project timeline is at risk due to delays in material shipment and availability.
5. Don’t Underestimate Labor Cost
When firms underbudget in labor cost, you can end up in a bad position with no leverage for staffing support when you need it. You don’t want to underestimate how many workers you need and end up in a position where you’re not able to procure enough talent to complete the project.
You can avoid this catastrophic error by getting a construction staffing agency on board during the preconstruction and buyout phases.
When you work with Aerotek, we can help you appropriately build labor cost into your bid, saving profit margin and putting you in a better position with your client. We’ll also help you account for any labor shortages.
In addition, we’ll provide you with local marketplace hiring data to help you understand the availability of specialty tradespeople in your market. This can help you decide if bringing in a traveling workforce to supplement your project team is an option.
To help things run as smoothly as possible (if you do decide to work with a staffing provider), you should share a monthly labor schedule that you regularly update based on any changes in project scope or schedule.
When you let your partners know about upcoming staffing needs, they’ll have more time to get you the best people for the job, which is especially important when you need skilled labor.
6. Fight to Stay Proactive
Underlying these construction project management tips is the need to fight for proactivity. This is especially true when it comes to procuring the workers you need to get the job done well — especially if the skilled labor pool is tight in your area. In Q4 2021, Associated General Contractors of America released a survey that found 45% of firms had to turn down work because they couldn’t find enough skilled laborers to fulfill the project requirements. This trend is likely to continue — with more and more construction workers retiring — and not enough to replace them.
“More than 1 in 5 construction workers are 55 or older, meaning that retirement will continue to contract the industry’s workforce. These are the most experienced workers, and their departures are especially concerning,” Associated Builders and Contractors Chief Economist Anirban Basu said in a 2024 report on the construction workforce shortage.
The best way to circumvent this trend is by maintaining a relationship with a reliable staffing provider that understands the industry and knows how to scale when project requirements evolve. Additionally, if you have a partner you trust, be proactive with them to learn local market hiring data so you can build cost into your bids.
Commit to Better Cycle Times and Profitability
Don’t take the evolving nature of construction projects as an excuse to misalign and risk plunging more over cost than is absolutely necessary. In an industry that runs on late and over-budget project deliveries, your clients will notice how much closer you are to your estimates than other firms they’ve worked with when you fight to stay proactive.
While you can’t avoid inherent uncertainties within the industry, staying proactive in as many areas as you can control by thinking ahead and looking for ways to save time and money will help you bring in more profit on all of your projects.
Get ahead of your next project schedule by connecting with our construction support experts. Request a free consultation to discuss your construction hiring, performance management, quality assurance or project supervision needs today.